Nickleby Fm Ltd v Somerfield Stores Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 30 July 2010 |
| Neutral Citation | [2010] EWHC 1976 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 30 July 2010 |
| Docket Number | Case No: HT-10–213 |
[2010] EWHC 1976 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: Mr Justice Akenhead
Case No: HT-10–213
Allen Dyer (instructed by Keystone Law) for the Claimant
Robin Neill (instructed by Somerfield Stores Ltd Legal Department) for the Defendant
Hearing date: 16, 29 July 2010
Mr Justice Akenhead:
The Claimant brings these proceedings to enforce an adjudicator's decision dated 5 June 2010. The jurisdiction of the adjudicator was challenged although he expressed in a non-binding manner the view that he had jurisdiction. The same jurisdictional challenge is maintained by the Defendant in these proceedings; the Defendant also argues that the Claimant is attempting to assert a new basis for the adjudicator's jurisdiction which was never advanced by it before the adjudicator and is materially different from the basis on which it argued before the adjudicator that he had jurisdiction. It is said that the Claimant should not be permitted to advance this “new basis” which is in any event factually disputed.
The Facts and the Contract
Somerfield Stores Ltd (“Somerfield”), the Defendant, owned a large number of supermarkets around the country. By an agreement dated 1 May 2006 (“the Contract”), Somerfield engaged Nickleby FM Ltd (“Nickleby”) to provide management services in connection with maintenance at many of its supermarkets around the country. The Contract was to run for three years.
Material provisions of the contract were:
(a) Clause 1.1 (Definitions)
““Management Fee” means the fee payable by Somerfield to the Contractor in each Budget Year in respect of the provision of the Services, comprising the Operating Costs, the Central Services Contribution and the Margin, as more particularly set out in Schedule 1
“Operating Costs” means the agreed costs and expenses incurred by the Contractor in employing the personnel and providing the resources and materials wholly and reasonably required for the performance of the Services as set out in Schedule 1…”
(b) Clause 2.6 required Nickleby to adopt the “most efficient, economic and effective working practices, processes and technology possible within the budgetary limits” and to use all reasonable endeavours to procure the various maintenance services materials and parts “at the best value for money available on the open market”.
(c) Clauses 5, 6, 7 and 8 described what was required of Nickleby in terms of providing Preventative and Reactive Maintenance as well as Minor and Capital Works. Clause 12 required the Contractor to employ an adequate number of persons of sufficient experience and ability and skill to perform supervise and administer the Services that were to be provided.
(d) Clause 15 made provision for the Management Fee to be paid to Nickleby by Somerfield. The Contractor was entitled to be paid by way of 12 equal instalments each year every month “per Budget Year”. There was no express provision for the Management Fee to be adjusted downwards although there was provision for it to be increased under Clause 15.4 for “unforeseen incidental costs and expenses” and under Clause 15.6 for “any amounts due to the Contractor resulting from the implementation of a Cost Savings Initiative in accordance with and subject to the terms of Schedule 5”.
(e) Clause 16 required Somerfield to reimburse to Nickleby “all capital and revenue expenditure…wholly and reasonably incurred by the Contractor in the provision of the Services” subject to certain qualifications.
(f) Clause 24
“24.1 This Agreement will commence on the Commencement Date, and…shall continue in force for a period of three years whereupon (save where the parties expressly agree otherwise) this Agreement will automatically terminate without the need to either part[y] to serve notice. The parties may agree in writing at any time to extend the duration of this Agreement by an additional period of 12 months (or such other period as may be agreed), such right to extend may be exercised on more than one occasion for as long as this Agreement remains in force.
24.2 Notwithstanding Clause 24.1, Somerfield may terminate all or any part of this Agreement by giving to the Contractor not less than 14 weeks’ notice in writing at any time. Somerfield shall be entitled to pay the Contractor in lieu of some or all of its entitlement to notice pursuant to this Clause 24.2 a sum equal to the Management Fees to which it would have been entitled during the unexpired part of the notice period.”
(g) The Disputes Clause provided ultimately for dispute resolution in the courts. There was no express procedure or requirement for adjudication.
(h) The Management Fee was set out in Schedule 1 and it was identified as £469,000 and £38,000 per annum plus VAT in respect of Operating Costs and Central Services Contribution plus 8% margin on the total combined Operating Costs and Central Services Contribution.
(i) Schedule 5 set out the provision for the “Shared Gain Scheme” which provided encouragement to the parties to make effective proposals for savings on both revenue and capital expenditure. If the savings were achieved, Nickleby was entitled to 20% and 15% respectively for savings which were the result of its initiative or Somerfield's initiative. This arrangement was referred to by the parties as “Gain Share”.
The Contract proceeded over the next three years and involved expenditure by Somerfield of many millions of pounds each year. In about April 2009 the Cooperative Group took over Somerfield. Around and before this time, thought was given by Somerfield and Nickleby to extending the Contract beyond 30 April 2009 which was when it was due to expire. There is no issue that by one means or another it was extended by over a year and in practice from 1 May 2009 to May 2010 the relationship continued and Nickleby provided maintenance services.
Discussions had started in January or February 2009 about the terms upon which any extension to the Contract should proceed. For instance, Somerfield proposed by letter dated at 3 February 2009 that the extension should be on terms that it was subject to termination on 14 weeks notice and that the Management Fee should be renegotiated to reflect amongst other things a reduction in staffing levels. That was rejected on 9 February 2009 by Nickleby in an e-mail.
A meeting took place on 17 March 2009 attended by, amongst others, Mr Smale of Nickleby and Mr Flanagan and Mr Wilson of Somerfield and at least a measure of agreement appears to have been reached. By an e-mail dated 17 March 2009, Mr Flanagan confirmed a number of points which seemed to confirm agreement that there would be an extension to the Contract (“Contract extension letter to be sent out ASAP”) and at least that existing entitlements to Gain Share would be paid as soon as possible. It is at least possible that entitlements to Gain Share during the period of extension were not as such agreed at this precise stage. However on 14 April 2009 Mr Smale e-mailed to Mr Wilson in the following terms:
“Have cogitated, deliberated, etc. and here are my thoughts:
1. Have no problem about relinquishing gain-share going forward.
2. I understand you are not looking to claw back gain share from past initiatives.
3. We have some work in progress that would fall under gain-share which I would be reluctant to surrender since most of the analysis and preparatory work has been done. This is to do with reducing the cost of the property maintenance contracts. I understand Somerfield was targeting a gross price reduction of £800k. If we achieved that we would have been entitled to £160k. Therefore, if it is acceptable to you, I propose we would cap any outstanding liability at £160k by way of compromise…”
There may well have followed some oral discussions between the parties.
On 1 May 2009, Mr Smale e-mailed Mr Flanagan in the following terms:
“…have been really tied up. On reflection and after discussion with my colleagues, we are willing to forego gainshare monies as of 1 st May. Obviously this wouldn't apply to existing gain share monies, just future ones.
Hope that wraps things up…”
Mr Wilson's response a few minutes later was:
“Thanks for this response. Just to be absolutely clear.
1. The potential claim for £160k raised in your e-mail of 14/4 is now removed.
2. Any current outstanding gain share claims for completed agreed projects are subject to final ratification of amount due.
3. No further gainshare from 1.5.09…”
Mr Smale's response a few minutes afterwards was simple:
“You've got it!”
These last three emails were not produced in the adjudication but were made available in these court enforcement proceedings.
On 5 June 2009, Mr New of Somerfield sent to Mr Smale a draft letter dated March 2009 to be signed by the parties; this letter primarily related to the extension to the Contract and to the fact that it was terminable on at least 14 weeks’ notice in writing. There was nothing about the change to the Gain Share arrangements. On 4 July 2009, Mr Smale wrote to Mr New in the following terms:
“Herewith signed copy of extension letter. Have struck a line through everything that is not to do with the extension of time. Happy to discuss any other issues and push them through the Contract Change Procedure if we and you agree, which is how they should be treated under the terms of the contract…”
The signed extension letter simply and only confirmed that the Contract term was to be extended unless and until terminated by Somerfield giving not less than 14 weeks’ notice in writing.
Following some exchanges, Mr New wrote to Mr Smale on 11 August 2009, enclosing another version of the letter with a “ Miscellaneous” paragraph heading which...
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